The figures show that purchases of five-year fixes dropped from 48% to 43%, while there was a significant increase for two-year fixes which rose from 35% to 42%. In addition to this, just over half of borrowers predict that interest rates will rise within the next 12 months, with 55% saying they think the cost of borrowing will increase by this time next year.
According to LMS, this expectation is a factor in the strong performance of the remortgage sector of the market, with homeowners looking to secure certainty over their monthly repayments. 28% think a rate rise is more than a year away, and 17% don’t expect a change at all.
Nick Chadbourne, CEO of LMS, had this to say: “Healthy competition between lenders combined with increased levels of consumer appetite resulted in a surge of two-year fixes in September. The market is experiencing record-breaking rates when it comes to two-year fixed products and with the advice of brokers, consumers are realising the immediate benefits of these products outweigh any potential risks.
Moving forwards, we expect to see the market segment further as consumers continue to act according to their personal circumstances rather than wider trends. Potential interest rate movements may cause a change, but industry opinion remains split on this. The one thing we can predict with certainty is that variable rate products remain off the table for the vast majority of borrowers.”
